Correlation Between Korea Refractories and Sejong Telecom

Can any of the company-specific risk be diversified away by investing in both Korea Refractories and Sejong Telecom at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Korea Refractories and Sejong Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korea Refractories Co and Sejong Telecom, you can compare the effects of market volatilities on Korea Refractories and Sejong Telecom and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Korea Refractories with a short position of Sejong Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Refractories and Sejong Telecom.

Diversification Opportunities for Korea Refractories and Sejong Telecom

0.74

Correlation Coefficient

Korea Refractories  Sejong Telecom

Poor diversification

The 3 months correlation between Korea and Sejong is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Korea Refractories Co and Sejong Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sejong Telecom and Korea Refractories is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Korea Refractories Co are associated (or correlated) with Sejong Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sejong Telecom has no effect on the direction of Korea Refractories i.e., Korea Refractories and Sejong Telecom go up and down completely randomly.

Pair Corralation between Korea Refractories and Sejong Telecom

Assuming the 90 days trading horizon Korea Refractories Co is expected to under-perform the Sejong Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Korea Refractories Co is 1.71 times less risky than Sejong Telecom. The stock trades about -0.06 of its potential returns per unit of risk. The Sejong Telecom is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  59,182  in Sejong Telecom on August 31, 2024 and sell it today you would lose (15,082) from holding Sejong Telecom or give up 25.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.09%
Values	Daily Returns

Korea Refractories Co  vs.  Sejong Telecom

Korea Refractories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Refractories Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Refractories is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sejong Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sejong Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Korea Refractories and Sejong Telecom

The main advantage of trading using opposite Korea Refractories and Sejong Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Refractories position performs unexpectedly, Sejong Telecom can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sejong Telecom will offset losses from the drop in Sejong Telecom's long position.

The idea behind Korea Refractories Co and Sejong Telecom pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.